William Hatch

In this era personal income is extremely important to the American people. With the increase in gasoline prices, food prices, and virtually every other commodity purchased, it is imperative that the American family increases its income or potential future income because prices are sure to escalate even more in the future. There are many ways to attempt to do this. For example, many will take a second job, others will try to develop a profitable hobby, while others make regular trips to the casinos. What ever solution is attempted, there are a number of trade offs that must be faced. A second job robs one of family and leisure time. A hobby may be enjoyable but it can be expensive and seldom is transformed into profit. And the visit at the nearest casino puts more money into the pockets of the casinos than in the pockets of the visitor.

My advocated solution would be investment. Yes, I have heard the naysayers predict financial catastrophe to investors. It is charged that investment, particularly stock market pursuits, are volatile and shades of 1929 are resurrected as proof that this is an unsafe direction. These same charges are dredged up every time a suggestion is made to tie Social Security to investment. And yes, there have been some investment disasters like Enron and Global Crossing. But is it any safer, tho, to trust government management of retirement funds in the present Social Security system? The cause of down turns in investment often is tied to the greed of investors. One has only to look at the real estate collapse to see this factor at work. Yet, over a period of time, the stock market has produced amazing results for investors. All who have placed funds in IRAs and other employer sponsored retirement programs attest to the fact that the stock market does produce greater returns than social security, bank savings accounts, and money market funds.

While I, myself, am not an investment guru, I do read and listen to the “experts” in the field of investment. And I have fallen afoul of poor investments because of ignorance and greed. But when I stick to the tried and true investment principles, I have had a modicum of success. There are two different directions for investment–growth and income. Growth is the more volatile of the two and would be recommended to younger, non retired investors who have the ability to wait out and recover from downturns or those willing to take higher risks for the greater profit potential. As a retiree I chose income for my concern is to supplement my retirement pay. I look for stocks or mutual funds that pay dividends and capital gains in the vicinity of 10% and have a history of doing so over a period of time. As it develops, the companies, which pay this kind of return, also have a small, consistent growth factor attached. Also I try to stay away from fad stocks like environmental, new age energy, and other unproven possibilities. Today the investment advisors are touting international stocks–China, India, Russia–that are experiencing great income for investors. But I will stick to Canadian oil and coal trusts and American Real Estate Trusts and pharmaceutical companies. The other countries just do not have enough experience in capitalistic stock markets for my money.

Another possibilities for investment is in mutual funds. For investors that do not have the inclination to manage their own stock portfolios, mutual funds do provide an alternative to direct stock investment. But even these must be investigated as to past and present performance as any stock would be. And the investor must be aware that mutual funds have a high management fee and often high turnover that will cut into return. One new form of investment is the ETF or Exchange Traded Fund. It is similar to a mutual but also has some of the characteristics of a stock. It is traded on stock exchanges, has less turnover than a mutual fund, has less management cost, and is subject to the trends of the stock market. Both of these investments do provide for a greater amount of diversification and safety than an individual stock portifolio but generally do not provide the return in either growth or income that stock does.

As we see the Social Security system faltering, as company pensions are disappearing, and as the cost of living for those on fixed incomes is spiraling upward, the need for supplemental income is accelerating. The reliance on government is not acceptable as government response, as espoused by the Three Stooges, is meager, uninformed, and demagogic. It is up to individual Americans to provide for their future and if retired, to protect their present and this will only be done successfully by personal investment.